Market Report

Volume or quality problem ?


Tilburg, April 15th, 2018

The most important topic on the agenda of the BVSE recovered paper conference was of course the situation in China and the consequences of import restrictions and quality requirements for the recovered paper market worldwide. Matthias Horx who did put the mind of participants already on positive in the first session by explaining that, in contrast of what is often thought, the world only has improved over the last century: less poverty, less crime and more children going to school for example and David Powlson of Poyry, who is fortunately still talking about recovered paper, expected that China will not be selfsufficient in the next decades were followed by the professionals in our sector, who tried to get an understanding of today’s market. This on a moment that everybody has the feeling that the biggest crisis is already behind us, by the way. Would that be possible ? As we are hearing now for a number of years the discussion was mainly about quality. With now 9 rounds of import licenses issued for in total 11 million tons, it was even stated that there is no volume problem. There should only be a quality problem. However, when there is no volume problem, there won’t be a quality problem anymore either.  This was also accentuated by Simon Ellin who not only claimed that big steps were made in improvement of quality but also that there were no stocks at his members yards and that recovered paper was not going into incineration either. If this is all correct, we perhaps may assume that the shift of destination of certain qualities already has been completed, with less clean qualities finding outlets in regions where Chinese buyers are stealing away especially the  clean grades. If this is indeed so, we are heading towards months of strong demand and increasing prices. The paper industry is doing well worldwide and needs a maximum supply of raw material. Mark Skorwider of Mondi Poland however, had calculated that on basis of the China import figures of December, January and February, eventually an oversupply would remain of 2 to 3 million tons, despite the start up of new capacities. The calculation of these months however reflects the purchase of Chinese buyers in the last Quarter, just in that period when prices started to go down. In March, April, May these figures could work out to be completely different.   

 


In short, it is still not very clear if we have an outlet problem (volume) or that we can sell everything when the quality is good.  Speakers agreed that no big change is expected in the import strategy of China. A question from the audience what was expected to be imported in volume into China this year, remained unanswered. The near future will surely tell. In the meantime we are experiencing a positive market with demand for all grades, with exception of a few special ones, being it with lower price levels for low grades than expected and anticipated, but with still prices that are not complicating generation of recovered paper. In our sector it all comes down to margin after all.      

Imports China halved this year

The difficulties in export of recovered paper to China are clearly shown by January and February statistics. A total of 1.237.492 ton was imported in January, basically half of what it has been in monthly average over the last years. Also these are purchases from October and November last year when the feeling was that volumes sold were still considerable, as also is shown by prices that were on double levels of today. Also in February imports into China were 47% lower than the same month in 2017. It therefore does not look promising.

Price indication

Price indications in Europe for low grades of recovered paper, sorted, baled and ex-works are now between € 40 and € 110 per ton. These prices are depending on quality, available volume, region and loaded weight.

Click here for the price chart, with prices of the last 10 years.

The price chart gives an indication of the price of mixed paper in the Netherlands free delivered mill over the last years.  Scrolling over the top of the colums gives the exact price indication in Euro's per ton.
To view the price chart completely, please click and hold on the price chart after opening and move cursor to left or right to see all available years/months